Friday reminded everybody of just how long we have a gone without a 1% or greater sell-off, and the volatility has jumped big time. Of course the big scare that prompted the selling was that the Federal Reserve may raise rates at the September meeting. Even if it does, which remains unlikely, the increase will be a paltry 25 basis points, or one quarter of one percentage point.
Still, investors never take kindly to a 2.45% sell-off, like the one we saw in the S&P 500, and they may be looking to shift more aggressive positions into dividend-paying large caps, which will remain in demand as rates will continue to stay low through 2017. We screened the Merrill Lynch research universe for stocks rated Buy, paid a dividend higher than the 30 year U.S. Treasury, which is at a 2.4% yield, and had the best volatility /risk rating.
We found four that make good sense now for worried equity investors.
This stock has had an incredible run this year but is off over 10% in less than a month. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV, with TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE. The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions.
With its shares trading at a very cheap 14.3 times estimated 2016 earnings, the company continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic but increased device financing plans.
The company reported inline numbers for the second quarter, and while the consolidated revenue number was slightly higher than the Merrill Lynch estimate, the EBITDA was slightly below. Company management noted it is on track to meet or exceed current estimates for the year.
Many Wall Street analysts have cited the company’s positive commentary on free cash flow, in addition to improving video/broadband trends later this year, with single truck-roll and new converged offerings expected to be coming in October. The recent FCC initiative to open up the set-top business may be part of the reason the stock has been hit hard recently.
AT&T investors are paid a huge 4.85% dividend. The Merrill Lynch price target for the stock, which is on the firm’s US 1 list, is $46. The Wall Street consensus target is $42.84. Shares closed Friday at $39.71.
This company remains a top Warren Buffet holding and offers not only safety, but an incredible strong worldwide brand. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands.
Led by Coca-Cola, its portfolio features 20 billion-dollar brands, including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade and Minute Maid. Globally, it is the top provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks. Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy its beverages at a rate of more than 1.9 billion servings a day.